Analyst Blasts 'Disaster of a Year' for New Broadcast TV Shows

Cliff Lipson/CBS

Only 23 percent of last season's new broadcast series, excluding reality and mid-season shows, were picked up for the fall, the lowest rate in the past five years, but the value of hits, such as "The Big Bang Theory," is rising, says Nomura's Michael Nathanson.

NEW YORK - The just-finished 2010/11 TV season had a failure rate of new broadcast series that hit the highest level in the past five years, according to a Wall Street report published Wednesday.

In his report entitled "Paying More for Less. A Deep Dive Into the TV Content Pipeline," Nomura analyst Michael Nathanson spoke of a "disaster of a year for new hit programming."

Of new shows launched in the fall of 2010 - excluding reality and mid-season shows, only five, or 23 percent, were picked up for a return in the upcoming 2011/12 season, down from 50 percent a year earlier and "even worse than the 27 percent in 2008, which was likely impacted by the WGA strike," he wrote.

The shows are CBS hits Hawaii Five-0, Mike & Molly and Blue Bloods, as well as Fox's Raising Hope and the CW's Nikita. Adding in four new shows that got picked up for this coming season after a mid- or late-season start - Bob's Burgers, Happy Endings, Harry's Law and Body of Proof, the number of returning shows rises to nine, according to Nomura.

CBS Television is seeing two new series, or 57 percent of its new shows when excluding reality and mid-season shows, from the just-ended season return for a second season, the highest percentage success rate among conglomerates' TV production units, according to the analyst report. Time Warner's TV studio got three pick-ups, or 29 percent of its new shows last season excluding reality and mid-season, while News Corp./Fox got two (33 percent) and Disney one and a half. NBCUniversal, Walt Disney's ABC Studios and independents "essentially struck out," Nathanson said.

As a result of the dearth of new hits, "the value of shows that are now deemed 'hits' are rising despite their smaller ratings," according to the analyst.

As proof, Nathanson pointed to an analysis of syndication sales of the past broadcast season compared with five years ago. "The dollars per average rating point for the two comedies recently sold (The Big Bang Theory and Modern Family) are anywhere from double to more than triple the comparisons of the comedies sold five years ago," he said.

Bing Bang Theory drew $1.5 million per episode in syndication, or 32 cents per viewer when using average 18-49 ratings, according to Nomura. In comparison, King of Queens in 2006 earned $425,000 or 10 cents.

Digital sales to new online players, such as Hulu and Netflix, and particularly international sales are helping TV studios make a profit earlier, Nathanson also highlighted in his report.

Historically, a TV studio would make a profit after back-end syndication sales to TV stations and/or cable networks. "However, the recent growth in international syndication has altered the profit equation for TV studios," he said. "Today, international syndication revenue is often large enough to offset the production deficit and bring a current show to break-even in year one, thereby accelerating the investment returns for the TV studios." Among others, CBS Corp. executives have repeatedly lauded strong international syndication sales as a boon.

Nathanson on Wednesday also highlighted a shift in TV viewer preferences. "Due to greater consumer choice and the advent of time-shifting technology, we are clearly seeing that broadcast viewers are trading in dramas and non-competition reality programming for comedies and competitive reality shows," the analyst explained.

Non-syndicatable genres like sports, news and reality have seen their share of primetime audiences increase from 35 percent in the 2006/07 season to 41 percent in the 2010/11 season, while there are "increasingly fewer broadcast viewers of scripted content," Nathanson said.

The analyst also looked at entertainment conglomerates he covers that own TV studios, concluding that CBS Corp. has the greatest financial exposure as its estimated TV studio profit for 2011 is more than 35 percent of his estimated total earnings before interest and taxes.

At Time Warner, the TV studio accounts for roughly 12 percent of overall company profits, at News Corp. it contributes around 10 percent, and at Walt Disney, it accounts for only 4 percent, according to Nathanson.

"CBS is best structured to benefit" from current TV trends "as it owns both a producer and a network that works in tandem and has the most stable schedule," Nathanson concluded. C

Meanwhile, "Time Warner has an exceptional TV studio, but its larger status as a buyer of syndicated content [at TNT and TBS] is a looming worry," he said. The cable networks have in recent years pushed original productions.